Looking to buy your first home? Chances are you’re super excited to be doing so, yet, a little overwhelmed with all of the different pieces of information you need to take in.
With all of that information, you more than likely have questions you would like answered!
With this in mind, we decided to answer three questions which came up at our recent first home buyer seminar, which were:
- Have the banks stopped lending for less than 20% deposit?
- What is the deposit on the contract and how does it relate to the deposit I am giving for the bank approval?
- Should I get a meth test done on a house?
Have the banks stopped lending for less than 20% deposit?
Technically no, but their available loans at 90% are extremely limited, so in most cases they are reluctant to pre-approve loans (on existing houses) over 80%, without a pending sale and purchase agreement. We can still get 90% loan-to-value ratio (LVR) pre-approved loans under the Welcome Home Loan option if borrowers meet the criteria. More than ever buyers are having to make compromises, be patient and think outside the square!
Make sure you:
- Seek expert advice.
- Speak with a mortgage adviser to see if you qualify for a Welcome Home Loan. Participating banks do differ on criteria.
- Consider building a new home as an option, or buying one off the plans.
- On advice from your mortgage adviser, place house offers subject to conditions, e.g. finance.
- See if family can help by way of guarantee or gift.
What is the deposit on the contract and how does it relate to the deposit I am giving for the bank approval?
This part can be confusing. The deposit on the contract – let’s call it a down payment – is separate (but may be similar) to the deposit we are putting into the overall submission to the bank. So, your overall deposit to buy the house for finance purposes could be say 10%, but, your down payment on the contract could be 5%. Estate agents prefer 10% down payment.
Remember: The down payment needs to be paid on going unconditional, so you need to put a figure that is readily available in cash. Alternatively, advise the agent that there will be a delay in paying the down payment while you seek early release (via your lawyer) of KiwiSaver funds. Sometimes a temporary overdraft may be available as a third option.
Should I get a meth test done on a house?
This comes down to your own peace of mind – a bit like getting a builders report done. If a house you are buying is tenanted, then that is certainly a good indication to get one done.
Remember: Any house regardless of age, location, whether owner occupied or not, could have had dubious activity happening in the past. A house is an expensive purchase so you cannot be too cautious!
These are all very good questions to ask when you are considering buying your first home. If you feel you need more questions answered, or, are ready to embark on your first home journey, talk with your mortgage adviser to help you through this exciting time in your life.